Accounting comparability and value relevance of accounting information: evidence from a change in revenue and expense recognition rules

Purpose The purpose of this paper is to examine the accounting comparability and value relevance implications of the changes in the accounting for freight services in-process introduced through the adoption of EITF No. 91-9. Design/methodology/approach This is an empirical archival research paper using financial statement data and stock price information for the US transportation companies. Findings The results indicate that following the adoption of EITF No. 91-9, there is an increase in the level of accounting comparability for firms in the US transportation industries. This paper also finds that the reduction in the number of reporting options for revenues and expenses associated with the adoption of EITF No. 91-9 led to an increase (decrease) in the industry-wide informativeness and value relevance of accounting earnings (book value of equity). Originality/value This paper contributes to the literature on the determinants of accounting comparability. Contrary to the bulk of the literature on the determinants of the degree of accounting comparability which focuses on the variations in the institutional features of different reporting regimes, this paper provides evidence on the determinants of accounting comparability within a single reporting regime. This paper also contributes to the literature on the determinants of the relative value relevance of accounting earnings and book value of equity.